If an employer provides insurance or pays for medical treatment for an employee, an income tax liability usually arises.

Medical insurance cover policies taken out by an employer to cover their employees is a taxable benefit for the employees which should be included on a form P11D, regardless of whether or not it includes cover for members of the employees’ families. Any claim made under such a policy for treatment is not a taxable benefit in itself as this is met by the insurance company.

Treatment costs either met or reimbursed by an employer on behalf of an employee are taxable on the employee as earnings (i.e. income tax and class 1 NI taken through PAYE). If the treatment is arranged and paid directly by the employer on behalf of the employee, this is a taxable benefit which should be included on a form P11D.

Not all medical treatments provided by an employer are fully taxable if certain conditions are met. The following are common examples of exemptions.

Annual medical check-ups and health screening

Annual medical check-ups and health screenings are generally exempt from tax up to a maximum of one medical check-up and one health screening each tax year.

To be exempt, health screenings must be available to all employees. Medical check-ups must be available to all employees or those who have been identified in a health screening as requiring a medical check-up.

Eye tests and VDU-related prescriptions

Eye tests and visual display unit (VDU)-related prescriptions are generally exempt from tax.

For employees who are required to use a VDU, any eye-tests are fully exempt. Glasses or contact lenses solely for the use of the VDU used in the course of their official duties, is fully exempt.

Where the glasses or contact lenses are needed generally as well, only the proportion of the cost relating to the VDU use is exempt. These exemptions apply regardless of whether the employee or employer pays for the eye test, glasses or contact lenses.

Overseas medical expenses

Overseas medical expenses incurred or reimbursed by an employer or insurance against such treatment overseas are exempt from tax if the need for treatment arose outside the UK and the employee was overseas for the purpose of performing their employment duties.

Recommended medical treatment

If the company pays for medical treatment, the first £500 of these costs will be an exempt if the employee has:

• been declared unfit for work, in writing, by a health care professional* (or will be unfit for work) because of injury or ill health for at least 28 consecutive days; or
• been absent from work because of injury or ill health for at least 28 consecutive days.

*A health care professional means: a registered medical practitioner, a registered nurse; or an occupational therapist, physiotherapist or psychologist registered with a relevant regulatory body.

Operational risk injuries and occupational diseases

Any medical treatment paid by the company because of an injury that is the result of a particular operational or occupational risk, will be an exempt benefit in kind if:

• it is a risk of the employee’s occupation
• the cause of the injury is reasonably attributable to the nature of the employment
• the risk is not common to everyone.

The example HMRC uses for this is a footballer breaking their leg at work. Unfortunately, HMRC would view that pain caused by sitting at a desk isn’t a risk of your occupation, as it is common to sit at desks regularly at home too.

Grants for employers of disabled employees

There are grants available for employers who need to make adaptations for a disabled employee. It can help pay for equipment, adapting existing equipment, extra travel costs, support workers, etc.

Under certain conditions, the grants can cover 100% of the costs. When cost sharing applies, the grant will cover up to 80% of approved costs up to £10,000, and up to 100% of approved costs over £10,000 (up to a total cap of £66,000 for YE 31/03/2024).

An employee can apply for the grant via the GOV.UK website: Access to Work: get support if you have a disability or health condition . They will receive a phone call to discuss their specific situation so it is important they have read the eligibility criteria before applying.